John Collier Japanese restaurant, Monday after Pearl Harbor, San Francisco Dec 8 1941
“It is about as keen on the euro as Nigel Farage.”
Another week, and another Greek crisis looms. It might seem only yesterday that the markets were on tenterhooks over whether the country would finally bring its miserable experiment in sharing a currency with Germany and France to an end, or whether there would be a last-minute compromise that would keep the show on the road for a few more months. Now, with elections due on September 20, and no clear victor likely, the whole circus is about to start up again. Investors could be forgiven for tuning out of the whole saga, and going back to worrying about whether anyone will actually pay £60 for an Apple Pencil, or what dramas lie in store for the Crawley family in the new series of Downton Abbey instead.
There is, however, an election coming up that genuinely matters to the future of the single currency – only it is taking place not in Greece, but in Poland. When that country elects a new government next month, the likely victor, the Law & Justice Party, will effectively close off the option of joining the euro one day. In reality, Greece was always too small and chaotic an economy to matter one way or another to the eurozone. But if Poland, along with the other rising economic powers of eastern Europe, turns its back on the euro, then that is far more serious. [..] When the big new countries of eastern Europe joined the EU, all of them were technically committed to joining the single currency as well. A few of the smaller ones have done so. Slovakia, Slovenia, Latvia and Lithuania have all joined since the currency was launched.
But with a combined population of less than 12m people, none of them has the weight to make much of an impact. The big countries are a different matter. With a combined population of 60m, Poland, Hungary and the Czech Republic are of a similar size, taken together, to Britain or France. Whether they ultimately join or not can have a big impact. From next month, that is going to be increasingly unlikely. Parliamentary elections are likely to result in the Right-wing Law & Justice party taking power. The party’s Andrzej Duda already overturned the odds to win the presidency earlier this year. It is about as keen on the euro as Nigel Farage. Only this week, Duda insisted that if Poland was to ever join the euro there would have to be a referendum: there is more chance of Nicola Sturgeon getting elected MP for Tunbridge Wells than of any country voting to join the euro – it usually gets pushed through without consultation.
Translation: France vs Germany.
When Jean-Claude Juncker this week told a packed European Parliament he intends to forge a eurozone system for guaranteeing bank deposits, the European Commission president’s intention was to send a firm message of determination to strengthen the single currency’s foundations. But just days after Juncker’s “state of the union” address, his attempt to sow hopeful seeds has hit stony ground in Berlin, where the plan was taken more as a declaration of war. Germany’s fightback begins when finance ministers gather in Luxembourg on Friday, and is set out in a “non paper” obtained by the FT. Unlike the series of emergency gatherings on Greece this summer, the weekend “informal” meeting of eurozone finance ministers was intended to be a calmer, and above all shorter, stocktaking of the health of the common currency.
Now, however, Germany has decided to use it as an opportunity to put down clear red lines in an attempt to redirect the eurozone reform discussion, which gained momentum following the mess of the July Greek bailout deal on what Berlin believes is an unacceptable course. Several other eurozone governments – notably France – were urging a speeding up of the eurozone reforms as a way to build confidence in the single currency after the tremors caused by a near “Grexit”, but the German paper, by so openly breaking with the EC, may instead highlight the deep differences that still exist. For Germany, Juncker’s announcement that he intends to “move swiftly on all fronts – economic, financial, fiscal and political Union,” seems to be viewed as a classic case of Europe seeking to put German taxpayers’ money where the EU’s mouth is. Or, alternatively, of putting the cart of shared financial risks, before the cart of tough creditor discipline.
Europe had better stop this nonsense.
The survival of economic and monetary union will require the creation of new supra-national institutions, including a joint eurozone treasury and a separate euro parliament, according to the single currency’s bail-out chief. Klaus Regling, head of the European Stability Mechanism (ESM), joined a clamour of voices in Brussels who are pushing for member states to cede sovereignty in bid to establish a full-blown fiscal union on the Continent. The first step will be the creation of a eurozone finance ministry, backed by a separate chamber for the currency’s 19 member states in the European parliament, said Mr Regling, who oversees the euro’s €500bn rescue fund. The move is necessary to “increase the robustness and minimise the vulnerabilities of the currency union”, said Mr Regling.
He added it would “imply a significant transfer of sovereignty, requiring democratic legitimacy”, which could be provided by a “special chamber of the European Parliament composed of deputies solely from euro area Member States”. His comments follow on from Jean-Claude Juncker, president of the European Commission, who is pushing for the creation of a euro treasury, along with a system of common deposit insurance and beefed-up tax and spending powers for the European parliament. Details of the new treasury – which would act as a finance ministry, pooling funds from euro member states – remain sketchy. But the notion has long been championed by France who want to steer EMU away from simply an enforcer of fiscal discipline, into a true economic government of Europe. Paris has also called for the eurozone to have a permanent finance minister.
Benoit Couere, France’s executive board member on the ECB, has called for the new treasury to be founded on the principles of the ESM – which currently pools contributions guaranteed by all members states for use in times of emergency financial stress. The ESM will be providing up to €60bn of Greece’s latest rescue deal, and has been deployed to bail-out Spanish and Cypriot banks over the last three years. But plans to forge ahead with a political and fiscal union are likely to meet fierce resistance in Berlin. Germany, Europe’s largest creditor state and biggest contributor to eurozone rescue schemes, has rejected surrendering tax and budget powers to Brussels before tougher rules are put in place to limit spending and punish errant governments – including the French. “It’s much more of a French idea rather than something according to Germany’s vision for the euro,” said Michael Wohlgemuth, director of the Open Europe think-tank in Berlin. “Germans don’t even have a word for ‘treasury'”.
Everyone must and will drill drill drill for cash flow.
The global surplus of oil is even bigger than Goldman Sachs thought and that could drive prices as low as $20 a barrel. While it’s not the base-case scenario, a failure to reduce production fast enough may require prices near that level to clear the oversupply, Goldman said in a report e-mailed Friday. The bank cut its forecast for Brent and WTI crude through 2016 on the expectation that the glut will persist on OPEC production growth, resilient non-OPEC supply and slowing demand expansion. “The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016,” Goldman analysts including Damien Courvalin wrote in the report. “We continue to view U.S. shale as the likely near-term source of supply adjustment.”
Goldman trimmed its 2016 estimate for West Texas Intermediate to $45 a barrel from a May projection of $57. The bank also reduced its 2016 Brent crude prediction to $49.50 a barrel from $62. WTI for October delivery fell as much as 45 cents, or 1%, to $45.47 a barrel on the New York Mercantile Exchange and is heading for a weekly decline. Prices are down 14% this year. Brent for October settlement is 1.7% lower this week. Oil in New York has slumped more than 25% from its June closing peak amid signs the glut will persist. Leading members of OPECs are sustaining output, while Iran seeks to boost supply once international sanctions are lifted. U.S. stockpiles remain about 100 million barrels above the five-year seasonal average.
“We now believe the market requires non-OPEC production to shift from our prior expectation of modest growth to large declines in 2016,” Goldman said. “The uncertainty on how and where that adjustment will take place has increased.” The U.S. pumped 9.14 million barrels a day of oil last week, almost 3 million barrels above the five-year seasonal average, according to data from the Energy Information Administration. While the EIA this week cut its 2015 output forecast for the nation by 1.5% to 9.22 million barrels a day, production this year is still projected to be the highest since 1972. OPEC, the supplier of 40% of the world’s crude, has produced above its 30-million-barrel-a-day quota for the past 15 months. Iranian Oil Minister Bijan Namdar Zanganeh has vowed to increase output by 1 million barrels a day once sanctions are removed as the nation seeks to regain market share.
What’s a company worth that is forced to sell its assets?
A renewed plunge in oil prices and the winding down of other financial lifelines is forcing shale drillers to auction off once-prized assets and settle for less in potential deals. This week, companies such as Chesapeake Energy Corp. said they are embracing the strategy as they confront the reality of a prolonged, painful crash. While executives have assured investors that it won’t be a fire sale, recent deals suggest that prices have fallen significantly from even a few months ago, according to data compiled by Bloomberg. With one-sixth of major independent oil and gas producers facing debt payments that are more than 20% of their revenue, austerity has replaced the swagger that characterized the earliest days of the oil bust.
Contracts that locked in higher prices are expiring, leading banks to reduce credit lines in coming months. Drillers caught in the squeeze may be forced to auction off some of their best holdings to raise cash or accept more expensive financing to avoid bankruptcy, according to more than a dozen bankers, lawyers and company officials who specialize in energy deals. “These companies are starting to be a little more realistic about their situation and to face up to the fact that they will probably have to do something they don’t want to do,” said Omar Samji, a partner in law firm Jones Day in Houston. “There’s not going to be an easy lifeline.” The first wave of deals is already looming: sales of land holdings in prolific oil regions. Oil market gyrations since July have made valuations hard to pin down, dimming the outlook for sales of whole companies.
Instead, executives are looking to shore up their balance sheets by selling land or wooing deep-pocketed private equity groups or hedge funds to invest in their operations in exchange for a share of revenue, Samji said. Cobalt sold off discoveries in Angola last month and EOG has begun an auction for acreage in Colorado and Wyoming. Anadarko said it will continue to weigh offers, and Chesapeake said Tuesday it’s still pursuing asset sales. The Oklahoma City-based producer is said to be seeking buyers for dry gas acreage in the Utica shale formation, according to people with knowledge of the matter. “Chesapeake is not desperate,” Chief Executive Officer Doug Lawler told investors Tuesday. “We are not going to have a fire sale on any asset.”
And more worserer after that.
Investor bets that Brazil and South Africa will default on their debt hit their highest level since the financial crisis, underscoring the stress mounting on emerging-market economies heading into the most anticipated Federal Reserve meeting in years. The cost to buy credit-default swaps—insurance-like contracts that compensate users for debt defaults—is far from the only sign that investor anxiety is building ahead of the Fed’s two-day meeting concluding Sept. 17. Currencies in Turkey, South Africa and Malaysia have plunged to the weakest levels in many years against the dollar. The average 10-year government debt yield in emerging countries has increased significantly, even as U.S. yields have slipped this summer. Bond yields move inversely to prices.
Many investors believe the Fed will raise short-term interest rates this year for the first time since 2006, intensifying the strain on developing nations that in many cases already are struggling with slowing growth, substantial debt and crumbling demand for the commodities that are at the heart of many of their domestic economies. Turkey and Brazil are considered especially vulnerable by many investors, thanks to economic imbalances that will likely be exacerbated by the declines of their currencies. Turkey’s external debt, or debt borrowed from foreigners, as a%age of its GDP is among the highest of all emerging countries, while Brazil is facing problems including weaker commodity prices, sluggish Chinese demand for its goods and the government’s struggles to cut spending without hitting revenue.
“Signatures were accumulating at 30,000 an hour on the pro-impeachment website on Thursday.”
Brazil’s currency has plummeted to an all-time low and borrowing costs have tightened viciously after Standard & Poor’s slashed the country’s debt to junk status, warning that the budget deficit has reached danger levels. The downgrade is a painful blow to a nation that thought it had finally escaped the Latin American curse of boom-bust cycles and joined the top league of rich economies. It is the second of the big emerging market (EM) economies to be stripped of its investment grade rating this year after Russia crashed out of the club in January. Little remains of the BRICS allure that captivated the world seven years ago, and now looks like a marketing gimmick. The Brazilian real tumbled to 3.90 against the US dollar as markets braced for parallel moves by Fitch or Moody’s.
The currency has lost 31pc of its value this year and more than 60pc since early 2011, when slums in the favelas of Rio were selling for the price of four-bedroom houses in the US. “The numbers are going to get much worse before they get better. We see nothing on the horizon that could be perceived as ‘good’ news,” said Win Thin from Brown Brothers Harriman. Mr Thin expects the real to reach 4.50 over the next three to six months in a cathartic overshoot, with the Bovespa index of equities likely to fall by another two-fifths, testing its post-Lehman low of 29,435 as the excesses of the credit bubble come home to roost. Investors have begun to shed holdings of Brazilian debt, afraid that some funds may be forced to eject Brazil from their indexes and liquidate holdings if a second agency joins S&P.
Yields on 10-year domestic bonds spiked almost one%age point to 15.6pc in panic trading in Sao Paolo on Thursday. S&P said Brazil’s government has failed to get a grip on rampant over-spending as tensions erupt between President Dilma Rousseff’s Workers Party (PT) and her coalition partners, and the economy slides into deep recession, leaving it badly exposed as the US Federal Reserve starts to drain liquidity from the global economy. “We now expect the general government deficit to rise to an average of 8pc of GDP in 2015 and 2016,” it said. Mrs Rousseff said Brazil would “pay all its bills and meet all its obligations”. Yet it is unclear how long she can last as momentum builds for impeachment over her role in the Petrobras corruption scandal.
Signatures were accumulating at 30,000 an hour on the pro-impeachment website on Thursday. “People are sick of this government, which has yet to offer any way out of the crisis. It is utterly incapable of governing,” said opposition leader Mendoca Filho. The country is now in a classic stagflation trap. S&P expects the economy to contract by 2.5pc this year and 0.5pc next year, causing the debt ratio to ratchet up quickly. Mrs Rousseff is being forced to tighten policy into the recession in a belated bid to salvage credibility, just as the commodity slump eats into export revenues from iron ore and other raw materials. The current account deficit is 4pc of GDP.
Gabriel Gersztein, from BNP Paribas, said nothing short of a 400 to 500 point rise in rates would stabilize the currency, but the central bank cannot plausibly do this because it would deepen the downturn, playing havoc with debt dynamics. Bhanu Baweja, from UBS, said public debt is likely to reach 72.5pc of GDP by 2018 and could rise relentlessly after that as the country passes its demographic sweet spot and starts to age rapidly. “The clock slowly ticks on, asking ever louder questions about public debt sustainability,” he said.
When Premier Li Keqiang took the stage Thursday at the World Economic Forum s Summer Davos meeting in Dalian, he told business leaders that although China faces challenges, growth is on track and fundamentals remain sound. The upbeat message is all part of a New Normal narrative from China s leadership as the economy transitions from relying on heavy industry and debt to one driven by consumption and services. What Li didn t mention was the spiraling bill associated with keeping the economy on course to hit the Communist Party s growth target of about 7% for this year.
From building bridges and highways to shoring up the nation’s currency and stock markets, China is rolling out hundreds of billions of dollars in its biggest stimulus since the package that followed the 2008 global financial crisis. More spending is coming, with the finance ministry this week urging an acceleration of projects and promising to cut fees and taxes for companies, while provinces are taking their own steps to support growth. Beijing has turned on the taps, lifting spending on everything from infrastru cture to public services, said Frederic Neumann at HSBC in Hong Kong. The nation’s authorities cannot be accused of sitting idly by as growth decelerates, with measures announced year-to-date amounting to substantial policy support, he said.
The world’s second-largest economy is growing at its slowest pace in 25 years, forcing the central bank to cut interest rates five times since November and funnel credit to local governments to finance new construction. Estimates vary on the overall size of spending given the difficulty in netting out new expenditure and money that would have been spent anyway. Shen Jianguang at Mizuho Securities expects the stimulus package to be as large as the one rolled out in 2009 and 2010, with fixed asset investment of up to 10 trillion yuan ($1.57 trillion) over the next two to three years.
No, Gary. Today’s markets are their own echo.
Volatility – the rate at which prices move up or down – has leaped in many security markets recently. The St. Louis Fed’s Financial Stress Index, whose 18 components include yields on junk and corporate bonds, an index of bond market volatility, and the Standard & Poor’s 500 index, is almost at a four-year high. I believe the restrictions on bank trading imposed by the 2010 Dodd-Frank Act, including the ban on banks’ proprietary trading and increased capital requirements, are a key reason, at least in the U.S. Large banks and other financial institutions simply aren’t carrying the big trading positions they once did, and therefore, liquidity in many markets has atrophied.
Then there’s China’s stock-market nosedive and currency devaluation. They provided a wake-up call about China’s slowing growth and the global effects on commodity prices, emerging markets and money flows. Volatility in U.S. markets may also be due in part to the delayed effects of the ending of quantitative easing by the U.S. Federal Reserve late last year. Since stocks began to revive in March 2009, equities have been floating on a sea of Fed money with little connection to the slowly growing economy beneath – something I dubbed “the Grand Disconnect.” Then there’s the shaky base of corporate earnings growth. With slower economic growth, sales gains have been slight. And business pricing power has been almost nonexistent, with minimal inflation and a strong dollar.
So top-line revenue growth – the foundation for profit gains – has been largely missing. Resourceful American businesses have cut costs ruthlessly to make up for the lack of revenue growth. As a result, profits’ share of national income leaped from the lows of the 2007-2009 recession. But profits’ share has stalled over the last several years, reflecting the slowing of productivity growth. Also, stocks aren’t cheap relative to earnings. The price-to-earnings ratio on the S&P 500 index over the last year is 18.2, compared with the norm of 19.4 over the last 20 years. But the better measure is the cyclically adjusted ratio, developed by Robert Shiller, which uses real earnings over the preceding 10 years to iron out cyclical fluctuations. On that basis, the current price-to-earnings ratio of 25.84 is 55% above the long-run norm of 16.6. And since the norm has been about 16.6 almost since 1992, price-to-earnings should run below trend for years to come, assuming the 16.6 remains valid.
Now you know where bankers rule.
The United Nations General Assembly has voted to accept new rules to guide sovereign debt restructurings. At a vote in New York on Thursday evening, the set of nine principles were adopted with 136 votes in favour, just 6 against and 41 abstentions. However, implementation of the principles is in doubt as the majority of international debt is governed by US or UK law. Both the US and UK were amongst the just six countries which voted against. The other four countries which voted against were Canada, Germany, Israel and Japan.
Commenting on the vote, Tim Jones, policy officer, Jubilee Debt Campaign, said: “This could prove to be a historic breakthrough. The vast majority of nations have spoken out for a change to the broken debt system. From the Greek debt debacle, to Argentina being held to ransom by vulture funds, to decades-old debt crises in Jamaica and El Salvador the need for change has never been clearer. It is outrageous that the UK has chosen to put reckless lenders ahead of people around the world by voting against these principles.”
The vote adopted nine principles that should be respected when restructuring sovereign debt: sovereignty, good faith, transparency, impartiality, equitable treatment, sovereign immunity, legitimacy, sustainability and majority restructuring. The principles come from negotiations over the last year, which most EU countries refused to take part in.
But will do QEn instead.
QE thus does not appear to be the best way forward for Europe. This is why there are economists who propagate a more efficient alternative, the so-called “helicopter money” approach. For as long as the economy fails to recover, newly printed money is simply distributed directly to the general population, as if it were dropped from a helicopter. Research shows that the money would be spent pretty much straight after it’s received, which would restore confidence to invest among businesses. It would also restore business confidence to take on new employees, who in turn respond by consuming more. And so the result becomes a virtuous circle. But there are drawbacks. Sharing out helicopter money is a temporary measure that can only be adopted in exceptional circumstances.
If at some point it transpires that the ECB has gone too far and created a threat of runaway inflation, it is very difficult to remove the newly created money from the economy. This is why there is a clear need for a structural and flexible policy measure which the central bank is able to use to kick-start the economy as and when it is necessary. A variation on the helicopter theme, a monetary basic income, provides a way forward. Under this scenario, the ECB would distribute an amount of money to each citizen on a monthly basis, calculated as a%age of average income (the amount therefore varies between countries). Let’s assume for the sake of simplicity that the amount is €400 a month throughout the Eurozone. It’s important that the individual Eurozone countries remain responsible for raising the €400 – for example by reducing benefit payments or tax allowance levels – whereupon they pay it back to the ECB.
So far, this is a neutral measure that shuffles money around without creating a stimulus. This remains the case except in times of crisis when the central bank increases the monthly payment to, say, €600, until the economy recovers. Meanwhile, each national authority keeps its repayment levels fixed at €400. The ECB thereby ends up printing an additional €200 per person per month, and this money is relatively quickly spent. As the economy recovers and growth and inflation figures rise, the basic income can be returned to the neutral level of €400. In cases where the ECB had been too generous, the basic income level could even be lowered temporarily to €300 until inflation stabilizes. This would essentially remove money from the economy.
Bring on the crazies.
Prime Minister Mariano Rajoy’s decision to pick a Donald Trump-style candidate to fire up his base in Catalonia is exposing Spain’s governing party to risks that Republican leaders in the U.S. may recognize. Xavier Garcia Albiol, a 47-year-old former basketballer who stands six foot eight inches (2 meters) tall, defied the People’s Party’s declines across most of Catalonia in 2011 to become mayor of the region’s third-biggest city with a campaign that demonized immigrants. While Rajoy may have calculated Albiol’s track record was worth the risk, he probably didn’t bank on the kind of off-message comments that have seen the would-be Republican presidential candidate rile his party’s establishment in the U.S. – in an interview last week, Albiol attacked the PP’s strategy for containing Catalonia’s efforts to break away from Spain and said the prime minister had made mistakes.
Rajoy is trying to revive his party’s fortunes in Catalonia’s Sept. 27 regional election to create a firebreak against Ciudadanos, a rival for the anti-independence, pro-business vote that is set to deny the prime minister an outright majority in December’s general election. The election campaign proper kicks off on Friday when the separatist parties aim to bring hundreds of thousands of supporters onto the streets of Barcelona. Spain’s 10-year bonds fell yesterday with yields rising 2 basis points to 2.102% after a survey by the state pollster, CIS, showed separatist parties might win a majority with 68 or 69 deputies in the 135-strong chamber.
The PP is set to win as few as 12 seats, with barely half the votes of Ciudadanos, the poll showed. Outflanked by Ciudadanos’s early opposition to Catalonia’s separatist president, Artur Mas, Rajoy is betting that Albiol’s ability to attract blue-collar voters by playing on their concerns about immigrants can limit the damage for his party. “It shows that the PP is fully aware of its marginal role in Catalonia,” Lluis Orriols, a political scientist at Madrid’s Carlos III University, said in a phone interview. “Like Donald Trump, the PP candidate can mobilize a group of voters you can’t reach otherwise, but you can hardly aspire to win like that.”
A sign of things to come.
Five minutes into Frank Edozie’s presentation on the challenges facing Nigeria’s power industry, the electricity cut out in the Jasmine Hall at the upmarket Eko Hotel in Lagos. “Very timely,” Edozie, a former power ministry adviser and a senior consultant to the U.K.-funded Nigerian Infrastructure Advisory Facility, said over the low muttering and laughter of an audience of more than 100 people. “We probably ran out of gas.” There’s no end in sight to the daily blackouts that the government says are costing Africa’s largest economy about $100 billion a year in missed potential and that President Muhammadu Buhari calls a “national shame.”
Gas shortages, pipeline vandalism, inadequate funding, unprofitable prices and corruption mean fixing the electricity cuts two years after a partial sale of state power companies to private investors won’t be easy. Generated output has never risen above 5,000 megawatts, which is about a third of peak demand, and if it did the state-owned transmission system can’t deliver any more than that before it starts breaking down. South Africa, with a less than a third of Nigeria’s population of about 180 million, has nine times more installed capacity and it too is grappling with blackouts. Nigeria, Africa’s biggest oil producer, ranked the worst of 189 countries after Bangladesh and Madagascar on the ease of getting electricity connected to businesses, costing almost 7% of lost sales each month, according to a 2015 World Bank Doing Business report.
The power bottleneck comes on top of slump in oil prices and currency that are threatening Nigeria’s role as a destination for investors. Economic growth slowed to 2.4% on an annual basis in the second quarter from 6.5% a year earlier. About two-thirds of Nigeria’s people have no access to electricity, and at the current plant commissioning rate, supply will barely meet 9,500 megawatts by 2020, according to a 2014 World Bank project document. Demand is expected to increase 10% each year. Buhari’s party promised before he won power in March’s election to generate 40,000 megawatts within four to eight years.
Blindly stumbling towards the cliff.
Auckland house prices were up $125,950 on last year – or $345 a day – according to sales data out from the Real Estate Institute. The city’s median sale price rose from $614,050 last August to $740,000 last month and prices were up $5000 since July. Colleen Milne, REINZ chief executive, said the presence of Auckland buyers in other regions was becoming more noticeable with a surge in Auckland investors buying in Dunedin and continued strong demand for properties in the Waikato and Bay of Plenty from Auckland buyers.
Nationally, 7766 homes were sold last month, up 41.7% annually but down 4.4% on the previous month of July. The national median price rose $45,000 annually to $465,000. The figures from REINZ come as the Reserve Bank cut official interest rates to 2.75%, and banks followed suit, cutting their floating mortgage rates. Most economists expect the Reserve to now retain an easing bias, with some tipping the rate to drop to 2% by early next year.
Four years ago, Robert and Joan Potter were facing a crisis. The monthly payments on their two-bedroom home in the coastal suburb of Laguna Niguel, Calif., had ballooned from $2,000 to $5,000 in the decade since they bought it for about $360,000. Now the retirees were rapidly falling behind. “It was my parents’ dream home,” said their son, Derrick, 43. Derrick, who works as a mortgage consultant, said Robert and Joan got suckered into the kind of inflationary deal known as a negative amortization loan, since outlawed by state legislators. “They had some sleazy mortgage broker who said my mom, who hasn’t worked in 25 years, made $10,000 a month.” Still, there was hope. The Potters heard about a firm called Brookstone Law, which was pioneering a novel strategy for challenging allegedly predatory banks.
The best part: As long as Brookstone was representing Robert and Joan, the bank would hold off on collecting mortgage payments or foreclosing. In 2011, Robert and Joan paid Brookstone $6,000 to become the lead plaintiffs in a “mass joinder” lawsuit against their lender, JPMorgan Chase Bank. Similar to class actions, mass joinders allow large numbers of people to collectively sue one defendant, except that in a mass joinder the plaintiffs do not have identical claims. Settlements, if there are any, get sorted out individually, depending on each plaintiff’s circumstances. Brookstone’s case against Chase alleged mortgage-related misconduct such as wrongful foreclosure and breach of contract. It demanded that the bank pay for lost home equity, lowered credit scores, and further damages.
It claimed that when the Potters refinanced in 2006, the bank manipulated them into taking a loan they couldn’t afford and hid its true interest rate. The suit was filed in Los Angeles County Superior Court on April 15, 2011. Eventually, Brookstone signed up more than 250 clients to join it. Casting itself as defending the little guys caught up in the subprime crisis, Brookstone, founded by a 41-year old attorney named Vito Torchia Jr., has represented at least 4,000 clients in a dozen mass joinder lawsuits against big banks, including Wells Fargo and Bank of America. Court documents indicate Brookstone’s earnings during 2011 and 2012 could be in the tens of millions of dollars. Yet the firm has yet to win a single one of these cases on the merits.
“For the Washington-Ankara-Riyadh axis, the objective of getting rid of ISIL implies the real objective which is to get rid of Assad.”
Foreign Fighters. The proliferation of Islamic militias in the region has been helping to create a jihadist “melting pot” in the last few months. In Iraq and in Syria this is channeling the ambitions of hundreds of foreign fighters who have set off to get to the front to join up with the rebel militias who are fighting against Assad’s government troops. This is a crucial element in the Syrian civil war. Today it’s estimated that the two most important jihadist groups, the al-Nusra Front, and the Islamic State in Iraq and the Levant have recruited to their ranks at least 9,000 non-Syrian fighters which is about 20% of the total. Including the other islamic groupings and the Free Syrian Army, this brings the overall figure to between 11,000 and 15,000.
According to estimates from our intelligence services, there are more than 60 of our fellow citizens who have gone off to fight side by side with the terrorists and at least 10 of these are Italians or naturalised Italians. Anyway, it’s a tiny number compared to the more than 1,500 who have set off from France, and the 800-1000 from Britain, or the 650 Germans and the 400 from the Netherlands and from Belgium. In this process, even the women have had leading roles: the Italian woman Maria Giulia Sergio is one of the young people that has recently chosen to convert to Islam to then join up in Syria. Since al-Baghdadi’s proclamation of the Caliphate, the Centre for the Study of Radicalisation and Political Violence in London has estimated that at least 4,000 western citizens have joined the conflicts in Iraq and Syria. Of these, about 550 are thought to be women who have set off from Europe and are now in the territory controlled by ISIL.
The controversial role of Ankara and the weapons going to the Peshmerga. In this coming and going of presumed and potential jihadists, Turkey is playing a crucial role. According to some people, even though Turkey is a member of NATO and a close ally of the West, it is in fact thought to be one of the leading supporters of ISIL. And anyway, it’s not by chance that the main strongholds of the terrorist group are situated along the border with Turkey. Meanwhile, the United States is arming and training the “moderate“ rebels and now ISIS fighters have rifles bearing the inscription: “Property of US Govt“. This was discovered by a governmental organisation: Conflict Armament Research.
The international coalition and the Washington-Riyadh axis . Having understood, with a certain delay, the danger of the expansion of the jihadist militias in the region, in August 2014, Obama made an agreement with a few partners in Europe, including ltaly, to establish an international coalition to fight ISIS. To support this, our government has so far sent 2.5 million dollars-worth of weapons, including machine guns, grenades, fighter planes and more than a million rounds of ammunition, as well as humanitarian assistance. The mission has given many people to believe that all of a sudden, Washington has changed tack and has decided to support the Syrian regime. That’s just not true. For the Washington-Ankara-Riyadh axis, the objective of getting rid of ISIL implies the real objective which is to get rid of Assad.
This can be seen in the words spoken by Obama who recently when he said that he was even ready to hit Syrian government positions if attacks on the ciilian population were found to be coming from such positions. However, the humanitarian factor carries very little weight on the political stage. The crucial point today is exclusively the future of Assad: Moscow and Teheran are asking for him to stay in power, the West is continuing to exert pressure to have him resign. Anyway, history teaches us that up until now, outside interference has never had the outcomes that were hoped for. In fact, it has always contributed to increasing sectarian clashes. Dividing up power into ethnic and religious quotas on the basis of one’s own interests is thought to be a deterrent for any sort of peaceful transition in preparation for national unity. Iraq, Lebanon, Afghanistan and Libya should tell us something.